Good Education is considered a gateway to a great career. But the cost of higher education today has gone up and can be an issue.
In order to help students, a number of lenders today provide education loans to cover all costs incurred including living expenses and getting an education loan in India is not difficult.
Here are some education loan details that are common across most lending institutions:
Available with and without Collateral
Education loans can go up to Rs 1 crore based on the needs of the student. While public sector banks lend collateral-free education loans for up to Rs 7.5 lakhs, many other private sector banks and education loan lenders give collateral-free loans up to Rs 40 lakhs. However, this will strictly depend on the lender.
Lower Interest Rates
Interest rates on education loans are lesser as lending for education is categorized under the Priority Sector. The interest rate can range from 9 -15% depending on the details of the applicant and lender credit policies.
Higher Credit Score Implies Better Interest Rates
While the student who needs the loan need not have a credit score, the guardian or parent who will be the co-applicant will definitely need to. As is the case with most loans, higher the credit score, better are the loan terms and conditions.
Provides Income Tax Benefits
The interest payment on an education loan is tax free under Section 80E of the Income Tax Act. This is a huge benefit for working professionals who are looking to save some tax.
Longer Repayment Periods
The actual tenure of the loan starts after the completion of the course / getting a job. It can extend up to 5-7 years after that.
Moratorium Allowed for Initial Periods
There is no EMI required during the initial periods of the loan and will only have to be repaid within a certain period post completion of the course. For eg. Education loans availed from the Union Bank of India will have to be repaid within 15 years after course and moratorium period.
Anyone who is looking to pursue higher education can apply for an education loan. A co-applicant is generally required. It could be your parents, siblings, spouse, etc.
Full or part-time courses can be chosen to avail an education loan. Vocational courses are also allowed. These courses could be done in India or any other country.
An education loan covers all expenses in relation to the course of study including course fee, cost of books, accommodation and boarding expenses, lab fees, library expenses, exam fee and also cost of airfare to the country of study and back
The lender takes a call on the amount, the margin and the collateral, (if required) based on the course opted for,the prospects of employment after finishing the course, and current academic performance of the student. The amount generally ranges from a few lakhs to a crore, or even more in certain cases.
The interest rate charged on an Education Loan can depend on many factors like the credit score of the co-applicant, value of collateral (if provided), employment prospects of the course, existing relationship between the lender and the borrower, etc.
Generally, the interest rate on education loans range from 9-15%. Loans from public sector banks tend to be cheaper while the private lenders are costlier.
But the banks tend to be rigid on maximum amounts and other conditions for a loan while private lenders are more flexible in this regard.
The documents required vary depending on the lender but some of the general requirements are -
KYC documents such as proof of Identity and address
Income statements such as Bank statement, salary slip, Income Tax returns of the co-applicant
Academic records of the student
Course details - GMAT, SAT, CAT scores,Acceptance letter, Fee invoice, and invoices for expenses.
Collateral documents (if needed)- Proof of ownership of the asset
General documents - Application form, etc
The conditions for margin money and collateral for an education loan can vary between lenders.
Margin money is the portion of the cost that is to be brought in by the borrower. Currently you can avail an educational loan for up to Rs 4 lakh without the need for any margin money. For amounts over Rs 4 lakh, a margin money of 5% is required for courses in India and 15% for education abroad.
Collateral is security that is pledged to the lender till the loan is repaid satisfactorily. Collateral could be a third party guarantee or pledging of assets like real estate, Fixed Deposits, etc.
If your loan amount is within Rs 4 lakh there is no collateral requirement. For loan amounts between Rs 4 lakh- Rs 7.5lakh a collateral in form of a third party guarantee is required. For loans over Rs 7.5 lakh a collateral is required for loan approval.
As is the case with most of the requirements, this can vary based on the lender.
Margin amount refers to a portion of the loan amount that is paid by the borrower, and is similar to a down payment. Generally, margin money is not required for an education loan of upto Rs. 4 lakh.
Additionally, collateral may also be required for a loan of above Rs. 4 lakh.
While education loans are beneficial and sometimes even a necessity, the amount may not be enough or you may need a lower amount within a short period of time. In such cases, opting for a personal loan is a great option.
Lenders such as Money View provide personal loans for education of upto Rs. 5 lakh within 24 hours of application approval. The application process is simple and the documentation requirements are minimal as well. To know more about this, click here.
Getting a higher education is a dream for many and thanks to education loans, finances need not be a problem anymore. Whether it is to study abroad or within the country itself. While scholarships can help, it may not fulfill the entire requirement. There are a number of lenders in the market today offering education loans.
But if you are looking for a collateral-free instant loan to fund your education requirements, visit the Money View website or download the loan app to apply today.
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